SEC’s Coronavirus Response Efforts: Maintaining Operations Consistent with Health Directives

On March 20, Securities and Exchange Commission (SEC) Chairman Jay Clayton released a statement assuring the public that the SEC will continue operating to ensure our capital markets remain open and function well. The SEC is working closely with the Federal Reserve, the Department of Treasury and other governmental agencies, along with market participants, to maintain market integrity and investor protection during this unprecedented coronavirus pandemic.

The SEC’s statement noted that the health and safety of the SEC’s colleagues, their families and their communities is their first priority. As such, the SEC moved to mandatory telework for all of its offices and has since fully transitioned the organization. The process began the week of March 9, although the agency had been preparing for telework readiness for weeks prior. The results of the transition gave the agency confidence in its ability to be fully operational, but it noted that as with any large-scale transition, it expects adjustments in certain functions may be necessary.

As part of its efforts, the SEC assembled a cross-divisional working group in early February to analyze and prepare for the potential impacts of the COVID-19 outbreak. The focus of the SEC’s efforts were initially on the impacts to public companies and reporting challenges for quarterly and year-end statements. The market monitoring activities and outreach efforts to “clear agencies, exchanges, issuers, public accounting firms, investor representatives, credit rating agencies, fund sponsors, investment advisers and other market participants, as well as other domestic and foreign regulators.” The SEC will continue to coordinate with various market participants to ensure integrity and resiliency of the securities markets, identify any concerning trends and assess impacts of actions taken by governmental authorities and private market participants around the world. A full discussion of measures taken by the SEC thus far can be found on the SEC’s Coronavirus (COVID-19) Response page.

The SEC has also recognized the importance of issuing prompt regulatory guidance and targeted regulatory relief as necessary and appropriate. As early as January, SEC Chairman Clayton reminded issuers that impacts of the coronavirus and issuer responses could be material to an investment decision, depending on a number of factors. In February, the SEC articulated its policy on granting relief for filing deadlines when filings could not be completed on time with the appropriate level of review, so long as the circumstances were beyond the control of the issuer. A fuller discussion on this topic is covered in the alert entitled “SEC Provides Filing Extension for Reporting Companies and Individuals Affected by Coronavirus” which can be found on the Ballard Spahr Coronavirus Disease 2019 (COVID-19) Resource Center (found here).

In early March, the SEC recognized that the COVID-19 outbreak would require more targeted assistance and relief for market participants. Numerous no action letters, proposed rule changes, staff guidance issuances and statements have been made with respect to the COVID-19 fallout—a trend likely to continue in the coming months. In addition, the comment periods for a number of proposed actions were set to expire in March, but the SEC stated they will not take final action before April 24 to allow commenters additional time to respond.

While the SEC has shown a willingness to be flexible in some areas given the unprecedented circumstances, the agency made clear that it will continue to vigilantly pursue fraud and misconduct in the market. The SEC is actively monitoring illicit schemes related to the COVID-19 outbreak and has already issued trading suspensions for misconduct. The agency is also working to educate investors and has issued alerts of potential COVID-19 related investment scams.

Ballard Spahr attorneys are continually monitoring developments and advising clients on the legal and business implications of the COVID-19 outbreak. The attorneys in Ballard Spahr’s Securities and Capital Markets Group counsel companies on regulatory compliance and corporate governance and are advising clients on the best path through the challenges created by the worldwide pandemic. For more information on navigating the COVID-19 outbreak, please visit Ballard Spahr’s COVID-19 Resource Center.

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